When comparing insurance policies, one common principle is that lower deductibles generally correspond to higher premiums, and higher deductibles usually correspond to lower premiums. This is because when an insured person opts for a lower deductible, the insurance company is at a greater risk of having to pay out claims. To compensate for this increased risk, the insurance company charges a higher premium.
Given the information in the table:
[tex]\[
\begin{tabular}{|l|c|}
\hline \multicolumn{2}{|c|}{\begin{tabular}{c}
Home Owner's \\
Policy Comparison
\end{tabular}} \\
\hline & Deductible \\
\hline Policy 1 & \$1,100.00 \\
\hline Policy 2 & \$1,500.00 \\
\hline
\end{tabular}
\][/tex]
We need to compare the premiums for Policy 1 and Policy 2 based on their deductibles.
1. Analysis of Deductibles:
- Policy 1 has a deductible of \[tex]$1,100.00.
- Policy 2 has a deductible of \$[/tex]1,500.00.
2. Comparison Based on Deductible:
- Policy 1 has a lower deductible (\[tex]$1,100.00) compared to Policy 2 (\$[/tex]1,500.00).
- According to the principle where lower deductibles typically result in higher premiums, Policy 1 with the lower deductible is likely to have a higher premium.
Thus, the correct statement is:
B. Policy 1 will have a higher premium because it has a lower deductible than Policy 2.
